Hong Kong withdraws Stanley plot after bids fail to meet reserve price

The biggest residential plot of land in Hong Kong’s southern Stanley district in two decades was withdrawn from sale by the government on Tuesday, after all four tenders failed to meet its reserve price.

The biggest residential plot of land in Hong Kong’s southern Stanley district in two decades was withdrawn from sale by the government on Tuesday, after all four tenders failed to meet its reserve price.

The plot on Cape Road is expected to accommodate about 650 flats with a gross floor area of 480,236 sq ft. It is the area’s biggest parcel of residential land in two decades and can accommodate a large-scale luxury housing estate, according to Centaline Surveyors.

“The government will not sell a site if no bid reaches the reserve price as assessed by the government’s professional valuers,” the Lands Department said on Tuesday. “This is in the interest of protecting public revenue. The reserve price is set on the day of tender closure so that the latest market conditions are taken into account.”

The government does not reveal its reserve price for plots of land.

This is the second time the government has withdrawn a residential plot of land from sale in this financial year, which runs from March to April. The last plot was withdrawn in Tuen Mun in April 2022.

Tuesday’s withdrawal comes after surveyors slashed market valuations to reflect the pessimism that persists among developers despite mainland China reopening its borders for international travel.

Vincent Cheung, the managing director of Vincorn Consulting and Appraisal, slashed his valuation of the plot from HK$16,300 (US$2,088) to just HK$11,000 per square foot in mid-December, or HK$5.28 billion, setting the lower end of market expectations. He estimated the selling price of flats to be built on the land at between HK$28,000 and HK$35,000 per square foot.

“The mass market will rebound faster than the luxury market, as luxury properties are more resilient during the ups and downs of the market,” Cheung said on Tuesday.

James Cheung, executive director at Centaline Surveyors, slashed his valuation of the plot from HK$16,000 to HK$13,000 per square foot, or HK$6.24 billion, last month. “Land prices began to sink in the second half of 2022, and the location of the land is not the best,” he said. The plot sits opposite Ma Hang Estate, a public housing estate in Stanley.

The plot attracted only four bids last week, from Sun Hung Kai Properties, CK Asset Holdings, K Wah International and a joint-venture of Sino Land and Great Eagle Holdings, which was below market expectations. The Lands Department said on Tuesday that bids can be influenced by a range of factors, such as developers’ corporate positions and development strategies, as well as how they assess market conditions and the attractiveness of a site.

The developers are “still pessimistic though some people have started to expect that residential prices will bottom out by the middle of this year”, said Alex Leung, senior director at CHFT Advisory and Appraisal.

Builders may be testing the waters with their bids, said Michael Lee, associate director for valuation and advisory at Pruden. “One major reason for the withdrawal is that the development, if completed, would be difficult to categorise as ‘luxury homes’, as certain government accommodations have to be provided within the development,” Lee said, who also pointed out that it faced a public housing estate.

Hong Kong’s housing market has been in correction since August 2021. All 133 major housing estates tracked by Centaline saw their market valuations drop in 2022 by up to 23.8 per cent on average. Close to 80 per cent, or 105 housing estates, saw their valuations drop by more than 10 per cent.

The luxury housing market was not spared either last year. Residence Bel-Air, for example, saw the number of transactions fall by half to 57 deals, according to Midland Realty.

But there is still some demand for such property. For example, a house on 66 Deep Water Bay Road in Stanley changed hands for HK$3.6 billion mid-December, according to an official document. It was the most expensive home transaction in terms of both total and per square foot price in 2022, agents said.

“Despite the cancellation of this tender, the private housing to be supported by the land supply of this financial year has already exceeded the supply target for this financial year,” a government spokesman said on Tuesday.